Despite Credit Crunch, Construction Spending Grew in July

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The New York Sun

Spending on construction of nonresidential buildings grew in July despite the credit woes that have dragged down construction of homes for the 17th straight month, according to data from the U.S. Census Bureau released yesterday.

The data show that the tentacle-like spread of problems originating from the subprime market has not yet infected all sectors of real estate, the chief economist with the Associated General Contractors of America, Kenneth Simonson, said.

“It’s comforting to know that the contagion hasn’t shown up immediately,” Mr. Simonson said. “These particular figures show that there has been no slowdown in nonresidential buildings, but it’s too early to say whether” this situation will last.

From June to July, nonresidential spending increased 0.6%, to $346 billion. But while nonresidential construction spending showed no drop, residential spending plummeted 1.5%, to $534 billion, over the same period. Compared with July 2006, residential building construction spending has decreased 16.1%.

Overall construction spending dipped 3.4%, to $657.7 billion, this year through July, compared with the same period last year.

New York City’s nonresidential construction spending is likely stronger than the national average because of large infrastructure projects like the two baseball stadiums going up in Queens and the Bronx, as well as mixed-use developments like Atlantic Yards in Brooklyn, Mr. Simonson said. One reason fo rthe steady growth in nonresidential spending is that some sectors, like power plants, are not as sensitive to shortages of credit as housing, Mr. Simonson said.

“Those projects are based on a 50-year horizon,” he said. “Utilities all over the country are scrambling to get enough power transmission abilities to avoid blackouts in the next few years. They have good access to the capital market even when lenders are more cautious.”


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